You may be interested
in selling land or other property to your children or heirs.
If you are receiving social security payments, these will not
be reduced, because the sale is not earned income. You have to
pay taxes on the difference in the purchase price or
acquisition value and the sale price. For tax purposes, it is
usually better to sell property that has the smallest
difference in the purchase and sale price and transfer
property with a large difference through the estate. The rule
requiring you receive no more than 30 percent of the sale
price the first year or you pay taxes on the total sales has
been abolished. Selling by installment gives you income each
year, and spreading the income over several years should
reduce your total tax burden.
The advantage of
freezing property values by selling to children has
essentially been eliminated. If property is transferred at
less than market value, if the transferor retains interest,
and if the proportion that is transferred carries a
disproportionate share of appreciation, the property is
included in the transferor's estate at death. In an
installment sale, the seller is treated as retaining an
interest in the property.
A property owner
should get expert legal advice if he is considering selling
property to the same family members who are receiving annual
gifts. These programs usually have to be separately
established.
